Why I believe the “Tax Chart” is misleading.

Why I believe the “Tax Chart” is misleading.      
By Joe Foy- Senior Policy Analyst, Nova Scotia Department of Development- Economic Policy Unit. Retired.

Recently, the Town distributed a chart comparing what the residential tax rate would be in 2002, just five years from now, if we stayed a Town, or joined Kings County or joined West Hants.   The “bottom line” was jarring: $3.49 as a Town, $2.99 in Kings and #1.66 in West Hants [leaving the ‘Village’ issue aside for now…]

Two public meetings followed, and for 4 hours discussion raged around those numbers, as people tried to figure out why there would be such a huge difference between the Kings’ and West Hants’ rates, and whether or not they were believable numbers.   In the end, no one there could explain the difference.  For awhile, many of us thought that it was due to a difference in amortization rates, but that turned out not to be the case (a 20-year rate was used in both.)

I believe that part of the answer lies in some assumptions made in the Report which the Town accepted from Grant Thornton.   The Report makes at least eight important assumptions [See p.D-4-3a (pdf 159) and also the Executive Summary), which are listed below (not in order of priority)]: 

1)  No increase in services in Hantsport...

2)  No decrease in services in Hantsport...

3)   All 5 Major infrastructure projects would be undertaken in the next 5 years...

4)  All 5 would executed just as described by Opus International Engineering report...

5)  All 5 would cost as much to do as Opus International projects...

6)  Both West Hants and Kings would have to take responsibility for all streets and roads  (with no responsibilities transferred to the Province)...       [Item 5-b, D-9  pdf 164]

7)  Hantsport receives no $$ from either the Federal or Provincial Governments for any of those infrastructure projects...

8)  Hantsport receives no transitional grants from the Province which could be applied to one or more of those infrastructure projects...

In my opinion, the likelihood of all 8 of those assumptions proving to be true is zero.   (In fact, I think the likelihood of any more than 2 of them (namely, #1 and #6) proving to be true is zero.)

On the contrary, as I see it, Hantsportians WOULD accept some decrease in services; NO municipality would choose to undertake all 5 projects of those projects within 5 years; those projects would NOT all be executed as described in the Opus Report; NOT every project would cost as much as Opus projects; Hantsport WILL receive some money for infrastructure work from the Federal and Provincial Governments, and Hantsport WILL receive some transitional grants which could be applied to some of the infrastructure work.

Therefore, as I see it, what the Report presents is an absolutely worst case scenario, one which is utterly unlikely to turn out to be true.    Therefore, plausibility = zero.

Therefore, as I see it, in general, the projected tax increases projected in the chart distributed for the public meeting, since they are based on the scenario presented in the Report, are also utterly unlikely.   Plausibility = zero.

Now I want to focus on one part of the chart: Why does the chart project a $1.66 residential tax rate in 2020 if we are in West Hants?

After the 2^nd public meeting, I received a helpful email from Grant Thornton.  It explained that West Hant’s revenue is expected to grow at $500,000 per year -- every year -- for the next five years, and that that new money would be enough to cover all or most of the costs of borrowing the money needed for the five Hantsport Infrastructure projects.  So, if they wanted to, West Hants could cover those bills from their new money, without raising the Hantsport tax rate.   [By contrast, King’s revenue is not expected to grow that fast, so they couldn't cover it from their new money, and so they would have to pass on much of the costs directly to Hantsport by raising Hantsport taxes.]

That leaves me three questions, two little, one big. 

The 1st little one is: Will West Hants will actually get that much new revenue every year for the next five years?  [Your guess is as good as mine....] 

The 2^nd little one is: what happens to our tax rate in 2021 and beyond?  Is West Hants going to keep on covering all the borrowing costs for our projects for next twenty years?   [Your guess is as good as mine...]

Now the BIG question: Why on earth would the residents of West Hants agree their Council spending all -- or almost all -- of their new revenue for the next five years doing infrastructure projects in Hantsport?  Have they suddenly fallen that deeply in love with us and somebody forgot to tell me?   Will not at least some of the Councillors in West Hants want to spend some of that new revenue in their own districts?   Do they not have an election to face in two years?  Honestly, assuming that West Hants’ Council will want to spend that much of their new revenue on our Hantsport infrastructure projects is one of the most utterly unlikely scenarios I have seen in a very long time.   Plausibility = very, very near zero.

I think it is time to “hit the pause” button, and take a careful look at some different scenarios, using different assumptions, before we make any more major decisions on our future.

Joe Foy, 16 William Street, Hantsport